<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission file number 1-11656
GENERAL GROWTH PROPERTIES, INC.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 42-1283895
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
110 N. Wacker Dr., Chicago, IL 60606
------------------------------------
(Address of principal executive offices, Zip Code)
(312) 960-5000
--------------
(Registrant's telephone number, including area code)
N / A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
The number of shares of Common Stock, $.10 par value, outstanding on August 9,
2000 was 52,100,760.
<PAGE> 2
GENERAL GROWTH PROPERTIES, INC.
-------------------------------
INDEX
-----
PAGE
NUMBER
------
PART I FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets
as of June 30, 2000 and December 31, 1999............... 3
Consolidated Statements of Operations and
Comprehensive Income for the three and six months
ended June 30, 2000 and 1999............................ 4
Consolidated Statements of Cash Flows
for the six months ended June 30, 2000 and 1999......... 5
Notes to Consolidated Financial Statements.............. 6
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 21
Liquidity and Capital Resources of the Company.......... 24
Item 3: Quantitative and Qualitative Disclosures about
Market Risk............................................. 27
PART II OTHER INFORMATION.
Item 4: Submission of Matters to a Vote of
Security Holders.................................. 28
Item 6: Exhibits and Reports on Form 8-K.................. 28
SIGNATURES................................................. 29
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
(Dollars in thousands, except for per share amounts)
ASSETS
------
JUNE 30, DECEMBER 31,
2000 1999
----------- -----------
Investment in real estate:
Land $ 650,216 $ 640,276
Buildings and equipment 3,836,573 3,664,832
Less accumulated depreciation (432,339) (376,673)
Developments in progress 22,856 21,443
----------- -----------
Net property and equipment 4,007,306 3,949,878
Investments in Unconsolidated Real
Estate Affiliates 695,463 666,074
Mortgage note receivable - 31,065
----------- -----------
Net investment in Real Estate 4,772,769 4,647,017
Cash and cash equivalents 40,263 25,593
Tenant accounts receivable, net 74,007 84,123
Deferred expenses, net 99,438 93,536
Investment in and note receivable
from General Growth Management, Inc. 62,400 65,307
Prepaid expenses and other assets 31,204 39,319
----------- -----------
$ 5,080,081 $ 4,954,895
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Mortgage notes and other debt payable $ 3,100,835 $ 3,119,534
Distributions payable 44,271 42,695
Accounts payable and accrued expenses 152,491 170,868
----------- -----------
3,297,597 3,333,097
----------- -----------
Minority interests 527,340 356,540
----------- -----------
Commitments and contingencies - -
Preferred Stock: $100 par value; 5,000,000 shares
authorized; 345,000 designated as
PIERS (Note 1) which are convertible and
carry a $1,000 liquidation value, 337,500 of
which were issued and outstanding at June 30,
2000 and December 31, 1999 337,500 337,500
Stockholders' Equity:
Common stock: $.10 par value; 210,000,000
shares authorized; 52,000,641 and 51,697,425
shares issued and outstanding as June 30,
2000 and December 31, 1999, respectively 5,200 5,170
Additional paid-in capital 1,204,085 1,199,921
Retained earnings (deficit) (281,267) (272,199)
Notes receivable-common stock purchases (8,660) (3,420)
Accumulated equity in other comprehensive loss
of unconsolidated affiliate (1,714) (1,714)
----------- -----------
Total stockholders' equity 917,644 927,758
----------- -----------
$ 5,080,081 $ 4,954,895
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements. .
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<PAGE> 4
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
(UNAUDITED)
(Dollars in thousands, except for per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
---------- --------- ---------- ----------
Revenues:
Minimum rents $ 105,276 $ 86,698 $ 207,278 $ 170,471
Tenant recoveries 53,256 40,764 105,651 82,896
Overage rents 3,116 5,326 5,786 9,187
Other 1,637 2,216 5,360 4,661
Fee income 1,741 912 3,434 2,961
---------- --------- ---------- ----------
Total revenues 165,026 135,916 327,509 270,176
---------- --------- ---------- ----------
Expenses:
Real estate taxes 12,488 11,504 25,068 23,350
Management fees to
affiliate 1,628 1,300 3,960 2,600
Property operating 36,868 31,624 77,301 62,763
Provision for doubtful
accounts 56 1,161 178 2,198
General and administrative 1,593 1,596 3,022 3,097
Depreciation and
amortization 32,355 25,753 61,758 50,768
---------- --------- ---------- ----------
Total expenses 84,988 72,938 171,287 144,776
---------- --------- ---------- ----------
Operating income 80,038 62,978 156,222 125,400
Interest expense, net (51,289) (37,270) (99,274) (76,357)
Equity in net income(loss)
of unconsolidated
affiliates 8,998 4,523 17,479 8,733
Gain on sales 44 2,977 44 2,977
Income before extraordinary
items and allocation to
minority interests 37,791 33,208 74,471 60,753
Income allocated to minority
interests (9,841) (8,793) (18,280) (13,009)
---------- --------- ---------- ----------
Income before extraordinary
items 27,950 24,415 56,191 47,744
Extraordinary items - - - (8,693)
---------- --------- ---------- ----------
Net income 27,950 24,415 56,191 39,051
---------- --------- ---------- ----------
Convertible Preferred Stock
Dividends (6,177) (6,117) (12,234) (12,234)
---------- --------- ---------- ----------
Net income available to
common stockholders $ 21,833 $ 18,298 $ 43,957 $ 26,817
========== ========= ========== ==========
Earnings before
extraordinary items per
share-basic $ 0.42 $ 0.44 $ 0.85 $ 0.87
========== ========= ========== ==========
Earnings before
extraordinary items per
share-diluted $ 0.42 $ 0.44 $ 0.85 $ 0.87
========== ========= ========== ==========
Earnings per share-basic $ 0.42 $ 0.44 $ 0.85 $ 0.66
========== ========= ========== ==========
Earnings per share-diluted $ 0.42 $ 0.44 $ 0.85 $ 0.65
========== ========= ========== ==========
Distributions declared
per share $ 0.51 $ 0.49 $ 1.02 $ 0.98
========== ========= ========== ==========
Net income $ 27,950 $ 24,415 $ 56,191 $ 39,051
Other Comprehensive income
(loss):
Equity in unrealized
income/(loss) on
available-for-sale
securities of
unconsolidated affiliate,
net of minority interest - - - -
========== ========= ========== ==========
Comprehensive income $ 27,950 $ 24,415 $ 56,191 $ 39,051
========== ========= ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements
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<PAGE> 5
GENERAL GROWTH PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
(Dollars in thousands, except for per share amounts)
SIX MONTHS ENDED
JUNE 30,
2000 1999
---------- ----------
Cash flows from operating activities:
Net Income $ 56,191 $ 39,051
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interests 18,280 13,009
Extraordinary items - 8,693
Equity in net income of unconsolidated affiliates (17,479) (8,733)
Provision for doubtful accounts 178 2,198
Distributions received from unconsolidated
affiliates 16,205 14,148
Depreciation 55,666 48,272
Amortization 6,092 2,495
Gain on sales (44) (2,977)
Net Changes:
Tenant accounts receivable 9,938 (3,520)
Prepaid expenses and other assets 8,115 (2,456)
Accounts payable and accrued expenses (18,377) (1,283)
---------- ----------
Net cash provided by (used in) operating
activities 134,765 108,897
---------- ----------
Cash flows from investing activities:
Acquisition/development of real estate and
improvements and additions to properties (105,179) (165,487)
Deposit on Ala Moana Center - (16,200)
Increase in investments in unconsolidated
affiliates (60,930) (381)
Change in notes receivable from General Growth
Management, Inc. 2,986 (14,643)
Distributions received from unconsolidated
affiliates 32,737 11,557
Increase in deferred expenses (11,827) (6,589)
---------- ----------
Net cash provided by (used in) investing
activities (142,213) (191,743)
---------- ----------
Cash flows from financing activities:
Cash distributions paid to common stockholders (52,964) (37,466)
Cash distributions paid to Operating
Partnership Unitholders (20,198) (19,021)
Payment of dividends on PIERS (12,234) (12,234)
Proceeds from exercised options 1,203 760
Proceeds from sale of common stock, net of
issuance costs 1,145 (74)
Proceeds from issuance of RPU's, net of issuance
costs 170,625 -
Proceeds from issuance of mortgage/other notes
payable 209,606 292,000
Principal payments on mortgage notes and other
debt payable (274,897) (141,134)
Penalty on retirement of debt - (38)
Increase in deferred expenses (168) (972)
---------- ----------
Net cash provided by (used in)
financing activities 22,118 81,821
---------- ----------
Net change in cash and cash equivalents 14,670 (1,025)
Cash and cash equivalents at beginning of year 25,593 19,630
---------- ----------
Cash and cash equivalents at end of period $ 40,263 $ 18,605
========== ==========
Supplemental disclosure of cash flow information
Interest paid $ 113,670 $ 91,196
Interest capitalized 9,382 8,027
Non-cash investing and financing activities:
Common stock issued in exchange for Operating
Partnership Units 418 170
Common stock issued in exchange for
GGP/Homart stock - 90,511
Operating Partnership Units issued as
consideration for purchase of land 215 -
Penalty on retirement of debt - 8,655
Notes receivable issued for exercised
stock options 6,360 -
Assumption and conversion of notes in
conjunction with acquisition of property 77,657 -
The accompanying notes are an integral part of these consolidated financial
statements
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<PAGE> 6
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
NOTE 1 ORGANIZATION
Readers of this quarterly report should refer to the Company's audited financial
statements for the year ended December 31, 1999 which are included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999
(Commission File No. 1-11656) dated March 14, 2000, as certain footnote
disclosures which would substantially duplicate those contained in such audited
financial statements have been omitted from this report. Capitalized terms used
but not defined in this quarterly report have the same meanings as in the
Company's 1999 Annual Report on Form 10-K.
GENERAL
General Growth Properties, Inc., a Delaware corporation ("General Growth"), was
formed in 1986 to own and operate regional mall shopping centers. All references
to the "Company" in these Notes to Consolidated Financial Statements include
General Growth and those entities owned or controlled by General Growth
(including the Operating Partnership and the LLC as described below), unless the
context indicates otherwise. Proceeds from General Growth's April 15, 1993
initial public offering of common stock (the "Common Stock") were used to
acquire a majority interest in GGP Limited Partnership (the "Operating
Partnership") which was formed to succeed to substantially all of the interests
in regional mall general partnerships owned and controlled by the Company and
its original stockholders. The Company conducts substantially all of its
business through the Operating Partnership, which commenced operations on April
15, 1993.
As of June 30, 2000, the Company owned 100% of fifty-three regional shopping
centers (the "Wholly-Owned Centers"); 50% of the stock of GGP/Homart, Inc.
("GGP/Homart"), 50% of the membership interest in GGP/Homart II L.L.C.
("GGP/Homart II"), 51% of the stock of GGP Ivanhoe, Inc. ("GGP Ivanhoe"), 51% of
the stock of GGP Ivanhoe III, Inc. ("GGP Ivanhoe III") and 50% of Quail Springs
Mall and Town East Mall (collectively the "Unconsolidated Real Estate
Affiliates"); and a 100% non-voting preferred stock interest representing 95% of
the equity interest in General Growth Management, Inc. ("GGMI"). As of such
date, GGP/Homart owned interests in twenty-three shopping centers (the "Homart
Centers"), GGP/Homart II owned interests in seven shopping centers (including
one shopping center under construction), GGP Ivanhoe owned 100% of two shopping
centers, and GGP Ivanhoe III owned 100% of eight shopping centers. Together, the
Wholly-Owned Centers and the centers owned by the Unconsolidated Real Estate
Affiliates comprise the "Company Portfolio" or the "Portfolio Centers".
During June 1998, General Growth completed a public offering of 13,500,000
depositary shares (the "Depositary Shares"), each representing 1/40 of a share
of 7.25% Preferred Income Equity Redeemable Stock, Series A, par value $100 per
share ("PIERS"). The Depositary Shares are convertible at any time, at the
option of the holder, into shares of Common Stock at the conversion price of
$39.70 per share of Common Stock. The PIERS and the Depositary Shares are
subject to mandatory redemption by General Growth on July 15, 2008 at a price of
$1,000 per PIERS, plus accrued and unpaid dividends, if any, to the redemption
date. Accordingly, the PIERS have been reflected in the accompanying financial
statements at such liquidation or redemption value.
During July 1999, General Growth completed a public offering of 10,000,000
shares of Common Stock (the "1999 Offering"). General Growth received net
proceeds of approximately $330,296 of which a portion was used to reduce
outstanding loans including certain indebtedness to affiliates of
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<PAGE> 7
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
the underwriter of the 1999 Offering. In addition, a portion of the proceeds of
the 1999 Offering were used to fund a portion of the purchase price of Ala Moana
Center (Note 2).
During 1999, General Growth established the General Growth Properties, Inc.
Employee Stock Purchase Plan (the "ESPP") to assist eligible employees in
acquiring a stock ownership interest in General Growth. A maximum of 500,000
shares of Common Stock is reserved for issuance under the ESPP. Under the ESPP,
eligible employees make payroll deductions over a six-month purchase period at
which time the amounts withheld are used to purchase shares of Common Stock at a
purchase price equal to 85% of the lesser of the closing price of a share of
Common Stock on the first trading day of the purchase period or the last trading
day of the purchase period. The first purchase period under the ESPP ended
December 31, 1999. On January 3, 2000, 26,205 shares of Common Stock were sold
to ESPP participants at a price of $23.80 per share. On July 1, 2000 41,423
shares of Common Stock were sold to ESPP participants at a price of $23.75 per
share. In addition, effective January 1, 2000, General Growth established a
Dividend Reinvestment and Stock Purchase Plan ("DRSP"). General Growth has
reserved for issuance up to 1,000,000 shares of Common Stock for issuance under
the DRSP. The DRSP will, in general, allow participants in the Plan to make
purchases of Common Stock from dividends received or additional cash
investments. Although the purchase price of the Common Stock will be determined
by the current market price, the purchases will be made without fees or
commissions. General Growth will satisfy DRSP Common Stock purchase needs
through the issuance of new shares of Common Stock or by repurchases of
currently outstanding Common Stock. As of June 30, 2000, an aggregate of 10,765
shares of Common Stock have been issued under the DRSP.
During May 2000, the Operating Partnership formed GGPLP L.L.C., a Delaware
limited liability company ("the LLC") by contributing its interest in a
portfolio of 44 Wholly-Owned regional shopping centers to the LLC in exchange
for all of the common units of membership interest in the LLC. On May 25, 2000,
a total of 700,000 redeemable preferred units of membership interest in the LLC
(the "RPUs") were issued to an institutional investor by the LLC, which yielded
approximately $170,625 in net proceeds to the Company. The net proceeds of the
sale of the RPUs were used to repay a portion of the Company's unsecured debt.
Holders of the RPUs are entitled to receive cumulative preferential cash
distributions per RPU (included in distributions payable at June 30, 2000) at a
per annum rate of 8.95% of the $250 liquidation preference thereof (or $5.59375
per quarter) prior to any distributions by the LLC to the Operating Partnership.
Subject to certain limitations, the RPUs may be redeemed in cash by the LLC at
any time on or after May 25, 2005 for the liquidation preference amount plus
accrued and unpaid distributions and may be exchanged by the holders of the
RPUs on or after May 25, 2010 for an equivalent amount of a newly created
series of redeemable preferred stock of General Growth. Such preferred stock
would provide for an equivalent 8.95% annual preferred distribution and would
also be redeemable by the Company for cash equal to the liquidation preference
amount plus accrued and unpaid distributions. The RPUs have been reflected in
the accompanying consolidated financial statements as a component of minority
interest at the current total liquidation preference amount of $175,000.
As of June 30, 2000, General Growth owned an approximate 72% general partnership
interest in the Operating Partnership (excluding its preferred units of
partnership interest as discussed below). The remaining approximate 28% minority
interest in the Operating Partnership is held by limited partners that include
trusts for the benefit of the families of the original stockholders who
initially owned and controlled the Company and subsequent contributors of
properties to the Company. These minority interests are represented by common
units of limited partnership interest in the Operating Partnership (the
"Units"). The Units can be redeemed for cash or, at General Growth's election
with certain restrictions, for shares of Common Stock on a one-for-one basis.
The holders of the Units
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<PAGE> 8
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
also share equally with General Growth's common stockholders on a per share
basis in any distributions by the Operating Partnership on the basis that one
Unit is equivalent to one share of Common Stock.
In addition, in order to enable General Growth to comply with its obligations in
respect to the PIERS, General Growth owns preferred units of limited partnership
interest in the Operating Partnership (the "Preferred Units") which have rights,
preferences and other privileges, including distribution, liquidation,
conversion and redemption rights, that mirror those of the PIERS. Accordingly,
the Operating Partnership is required to make all required distributions on the
Preferred Units prior to any distribution of cash or assets to the holders of
the Units. At June 30, 2000, 100% of the Preferred Units (337,500) were owned by
General Growth.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and the Operating Partnership consisting of the fifty-three centers
(including those owned by the LLC) and the unconsolidated investments in
GGP/Homart, GGP/Homart II, GGP Ivanhoe, GGP Ivanhoe III, Quail Springs Mall,
Town East Mall and GGMI. All significant inter-company balances and transactions
have been eliminated.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary for a fair statement of the financial position of the
Company as of June 30, 2000 and the results of operations for the three and six
months ended June 30, 2000 and 1999 and cash flows for the six months ended June
30, 2000 and 1999 have been included.
Certain amounts in the 1999 consolidated financial statements have been
reclassified to conform to the 2000 presentation.
EARNINGS PER SHARE ("EPS")
Basic per share amounts are based on the weighted average of common shares
outstanding of 51,941,744 for 2000 and 40,861,764, for 1999. Diluted per share
amounts are based on the total number of weighted average common shares and
dilutive securities (stock options) outstanding of 51,974,500 for 2000 and
41,001,796 for 1999. The effect of the issuance of the PIERS is anti-dilutive
with respect to the Company's calculation of diluted earnings per share for the
three and six months ended June 30, 2000 and 1999 and therefore has been
excluded. The outstanding Units have been excluded from the diluted earnings per
share calculation as there would be no effect on the EPS amounts since the
minority interests' share of income would also be added back to net income.
Options to purchase 306,141 and 258,595 shares of Common Stock pursuant to
General Growth's stock option plans which were granted on May 23, 2000 and
March 25, 1999, respectively, have not been included in the computation of
diluted EPS because the conditions which must be satisfied prior to the issuance
of any such shares under such plans were not achieved during the applicable
periods.
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<PAGE> 9
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
The following are the reconciliations of the numerators and denominators of the
basic and diluted EPS.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2000 1999 2000 1999
---------- --------- ---------- ----------
Numerators:
Income before extraordinary
items $ 27,950 $ 24,415 $ 56,191 $ 47,744
Dividends on PIERS (6,117) (6,117) (12,234) (12,234)
---------- --------- ---------- ----------
Income available to
common shareholders
before extraordinary
items - for basic and
diluted EPS 21,833 18,298 43,957 35,510
Extraordinary Items - - - (8,693)
---------- --------- ---------- ----------
Net income available to
common shareholders - for
basic and diluted EPS $ 21,833 $ 18,298 $ 43,957 $ 26,817
========== ========= ========== ==========
Denominators:
Weighted average common
shares outstanding
(in thousands) - for
basic EPS 51,965 41,638 51,942 40,862
Effect of dilutive
securities - options 46 138 33 140
---------- --------- ---------- ----------
Weighted average common
shares outstanding
(in thousands) - for
diluted EPS 52,011 41,776 51,975 41,002
========== ========= ========== ==========
NOTES RECEIVABLE - OFFICERS
In April, May and September, 1998 certain officers of the Company issued to the
Company an aggregate of $3,164 of promissory notes in connection with their
exercise of options to purchase an aggregate of 166,000 shares of the Company's
Common Stock. During 1999, the Company received approximately $62 in payments,
made advances of approximately $380 in conjunction with additional advances and
Common Stock purchases by such officers and forgave approximately $64 in
principal and accrued interest on such notes. During the first quarter of 2000,
the Company made an advance of $5,240 in conjunction with an exercise of options
to purchase 200,000 shares of Common Stock by one of such officers. During the
second quarter of 2000, the Company made an advance of $1,120 to another officer
of the Company in conjunction with an exercise of options to purchase 40,000
shares of Common Stock by such officer. The $1,120 advance was repaid in June
2000. Also in 2000, the Company forgave approximately $150 of other notes
receivable from an officer (previously reflected in prepaid expenses and other
assets). The notes, which bear interest at a rate computed as a formula of a
market rate, are collateralized by the shares of Common Stock issued upon
exercise of such options, provide for quarterly payments of interest and are
payable to the Company on demand.
REVENUE RECOGNITION
Minimum rent revenues are recognized on a straight-line basis over the term of
the related leases. Overage rents are recognized on an accrual basis (see Note
8). Recoveries from tenants for taxes, insurance and other shopping center
operating expenses are recognized as revenues in the period the applicable costs
are incurred. The Company provides an allowance for doubtful accounts against
the portion of accounts receivable (including amounts recognized as receivable
due to the recognition of minimum rents on a straight-line basis as described
above) which is estimated to be
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<PAGE> 10
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
uncollectible. Such allowances are reviewed periodically based upon the recovery
experience of the Company.
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive
Income" requires that the Company disclose comprehensive income in addition to
net income. Comprehensive income is a more inclusive financial reporting
methodology that encompasses net income and all other changes in equity except
those resulting from investments by and distributions to equity holders. One
item included in comprehensive income but not net income is unrealized holding
gains or losses on marketable securities classified as available-for-sale.
Although General Growth and its consolidated affiliates do not have any material
available-for-sale securities, one of its unconsolidated affiliates received
common stock of Simon Property Group, Inc. as part of a 1998 transaction.
Holding gains or losses on such securities through June 30, 1999 were not
significant and were not reflected. However, at December 31, 1999 the Company
reduced its carrying amount for its investment in such unconsolidated affiliate
by $2,436 and reflected $1,714 as other comprehensive loss, net of minority
interest of $722, as its equity in such unconsolidated affiliate's cumulative
unrealized holding loss on such securities. For the three and six months ended
June 30, 2000 there were nominal holding losses on such securities which have
not been reflected.
BUSINESS SEGMENT INFORMATION
The Financial Accounting Standards Board (the "FASB") has issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("Statement 131"). Statement 131 requires disclosure of certain operating and
financial data with respect to separate business activities within an
enterprise. The sole business of General Growth and its consolidated affiliates
is owning and operating shopping centers. General Growth evaluates operating
results and allocates resources on a property-by-property basis and does not
distinguish or group its consolidated operations on a geographic basis.
Accordingly, General Growth has determined it has a single reportable segment
for Statement 131 purposes. Further, all operations are within the United States
and no customer or tenant comprises more than 10% of consolidated revenues.
NOTE 2 PROPERTY ACQUISITIONS AND DEVELOPMENTS
WHOLLY-OWNED PROPERTIES
2000
On April 26, 2000, the Company acquired a 100% interest in Crossroads Center in
St. Cloud (Minneapolis), Minnesota for a purchase price of approximately $80,000
as further described in Note 6.
1999
On January 11, 1999, the Company acquired a 100% ownership interest in The
Crossroads Mall in Kalamazoo, Michigan. The aggregate purchase price was
approximately $68,000 (subject to pro-rations and certain adjustments), which
was funded initially from a new $83,655 short-term floating rate interim loan.
In May 1999, a new $45,000 ten-year non-recourse mortgage loan collateralized by
the property was obtained.
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<PAGE> 11
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
On July 30, 1999, the Company acquired a 100% ownership interest in the Ala
Moana Center in Honolulu, Hawaii. The price paid to the seller was $810,000
(before closing adjustments, including a credit for the cost to complete an
ongoing expansion project), and was funded with the proceeds of a short-term
first mortgage loan of approximately $438,000 and approximately $294,000 in cash
including a portion of the net proceeds from the 1999 Offering. The short-term
floating rate loan was fully repaid on August 26,1999 with the proceeds of the
issuance of commercial mortgage-backed securities (Note 4).
On October 28, 1999, the Company acquired Baybrook Mall in Houston, Texas. The
aggregate consideration paid by the Company was approximately $133,000 (subject
to pro-rations and certain adjustments), which was paid in cash (raised
primarily through new long-term financing on other previously unsecured
properties), and a new 10-year $95,000 non-recourse loan.
The Company financed the forgoing acquisitions through a combination of secured
and unsecured debt and the proceeds of the 1999 Offering as described in Note 1.
All acquisitions completed through June 30, 2000 were accounted for utilizing
the purchase method and accordingly, the results of operations are included in
the Company's results of operations from the respective dates of acquisition.
DEVELOPMENTS
During 2000 and 1999, the Company was developing or had completed construction
at two development sites: Grandville (Grand Rapids), Michigan and Frisco
(Dallas), Texas. Construction of the RiverTown Crossings Mall, a Wholly-Owned
Center located in Grandville (Grand Rapids), Michigan, commenced in December
1997, and opened in November 1999. Construction of Stonebriar Centre, owned by
GGP/Homart II, located in Frisco (Dallas), Texas commenced in October of 1999
and opened as scheduled on August 4, 2000.
During 1999, the Company formed a joint venture to develop a regional mall in
Westlake (Dallas), Texas. As of June 30, 2000, the Company has invested
approximately $13,567 in the joint venture. In addition, the Company is
currently obligated to fund pre-development costs (estimated to be approximately
$1,545, a major portion of which remains to be incurred). Actual development
costs are not resolved at this time. The retail site, part of a planned
community which is expected to contain a resort hotel, a golf course, luxury
homes and corporate offices, is currently planned to contain up to 1.6 million
square feet of tenant space including up to six anchor stores and a multi-screen
theater. There can be no assurance that development of this site will proceed
beyond the pre-development phase.
The Company also owns and is investigating certain other potential development
sites, including sites in Toledo, Ohio and West Des Moines, Iowa, but there can
be no assurance that development of these sites will proceed.
11 of 29
<PAGE> 12
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
NOTE 3 INVESTMENTS IN UNCONSOLIDATED AFFILIATES
GGP/HOMART
The Company currently owns 50% of GGP/Homart with the remaining ownership
interest held by an institutional investor. At June 30, 2000, GGP/Homart owned
interests in twenty-three regional shopping malls, six of which were owned
jointly with venture partners. During 2000, GGP/Homart purchased its venture
partner's interest in Lakeland Square (Lakeland, Florida). During 1999,
GGP/Homart purchased its venture partner's interest in the Parks at Arlington
(Arlington (Dallas), Texas). GGP/Homart has elected real estate investment trust
status for income tax purposes. The Company shares in the profits and losses,
cash flows and other matters relating to GGP/Homart in accordance with its
ownership percentage. The co-investor in GGP/Homart has an exchange right under
the GGP/Homart Stockholders Agreement, which permits it to convert its ownership
interest in GGP/Homart to shares of Common Stock of General Growth. If such
exchange right is exercised, the Company may alternatively satisfy such exchange
in cash. During 1999, the Company received notice that one of the institutional
investors (holding an approximate 4.7% interest in GGP/Homart) desired to
exercise its exchange right. The Company satisfied the exercise of such exchange
right (effective as of January 1, 1999) by issuing 1,052,182 shares of Common
Stock, thereby increasing its ownership interest in GGP/Homart from
approximately 38.2% in 1998 to approximately 42.9% for the first quarter of
1999. During the second quarter of 1999, two additional co-investors (which then
owned in the aggregate an approximate 7.1% interest in GGP/Homart) notified the
Company that they desired to exercise their exchange rights. The Company
satisfied the exercise of such exchange rights (effective as of April 1, 1999)
by issuing an aggregate of 1,551,109 shares of Common Stock, thereby increasing
its ownership interest in GGP/Homart to 50%.
GGP/HOMART II
In November 1999, the Company, together with New York State Common Retirement
Fund ("NYSCRF"), the Company's co-investor in GGP/Homart, formed GGP/Homart II,
a Delaware limited liability company which is owned equally by the Company and
NYSCRF. GGP/Homart II owns 100% interests in Stonebriar Centre in Frisco
(Dallas), Texas (currently under construction), Altamonte Mall in Altamonte
Springs (Orlando), Florida, Natick Mall in Natick (Boston), Massachusetts and
Northbrook Court in Northbrook (Chicago), Illinois which were contributed by the
Company; and 100% interests in Alderwood Mall in Lynnwood (Seattle), Washington;
Carolina Place in Charlotte, North Carolina; and Montclair Plaza in Los Angeles,
California which were contributed by NYSCRF. Certain of the malls were
contributed subject to existing financing in order to balance the net equity
values of the malls contributed by each of the venture partners. According to
the membership agreement between the venture partners, the Company and its joint
venture partner share in the profits and losses, cash flows and other matters
relating to GGP/Homart II in accordance with their respective ownership
percentages. As major operating and capital decisions require the approval of
both venture partners, the Company is accounting for GGP/Homart II using the
equity method.
GGP IVANHOE III
In 1998, GGP Ivanhoe III acquired the U.S. Prime Property, Inc. ("USPPI")
portfolio through a merger of a wholly-owned subsidiary of GGP Ivanhoe III into
USPPI. The properties acquired include: Landmark Mall in Alexandria, Virginia;
Mayfair Mall and adjacent office buildings in Wauwatosa (Milwaukee), Wisconsin;
Meadows Mall in Las Vegas, Nevada; Northgate Mall in Chattanooga, Tennessee;
Oglethorpe Mall in Savannah, Georgia; and Park City Center in Lancaster,
Pennsylvania. In 1999, GGP Ivanhoe III acquired Oak View Mall in Omaha, Nebraska
and Eastridge Shopping Mall in San Jose, California.
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<PAGE> 13
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
GGP Ivanhoe III, which has elected to be taxed as a REIT, is owned 51% by the
Company and 49% by a joint venture partner. The joint venture partner in GGP
Ivanhoe III is an affiliate of Ivanhoe Inc. of Montreal, Quebec, Canada
("Ivanhoe") and is also the Company's joint venture partner in GGP Ivanhoe
(described below). The Company and Ivanhoe share in the profits and losses, cash
flows and other matters relating to GGP Ivanhoe III in accordance with their
respective ownership percentages except that certain major operating and capital
decisions (as defined in the stockholders' agreement) require the approval of
both stockholders. Accordingly, the Company is accounting for GGP Ivanhoe III
using the equity method.
GGP IVANHOE
GGP Ivanhoe owns The Oaks Mall in Gainesville, Florida and Westroads Mall in
Omaha, Nebraska. The Company contributed approximately $43,700 for its 51%
ownership interest in GGP Ivanhoe and Ivanhoe owns the remaining 49% ownership
interest. The terms of the stockholder's agreement are similar to those of GGP
Ivanhoe III.
TOWN EAST MALL / QUAIL SPRINGS MALL
The Company owns a 50% interest in Town East Mall, located in Mesquite, Texas
and a 50% interest in Quail Springs Mall in Oklahoma City, Oklahoma. The Company
shares in the profits and losses, cash flows and other matters relating to Town
East Mall and Quail Springs Mall in accordance with its ownership percentage.
GGMI
The Operating Partnership currently holds all of the non-voting preferred stock
ownership interest in GGMI representing 95% of the equity interest. Certain key
current or former employees of the Company hold the remaining 5% equity interest
through ownership of 100% of the common stock of GGMI, which is entitled to all
voting rights in GGMI. Accordingly, the Company utilizes the equity method to
account for its ownership interest in GGMI. GGMI cannot distribute funds to its
common stockholders until its available cash flow exceeds all accumulated
preferred dividends owed to the preferred stockholder. As of June 30, 2000, no
preferred stock dividends have been paid by GGMI. Due to these currently unpaid
and accrued preferences on the preferred stock, the Company has been allocated
100% of the earnings (loss) and cash flows generated by GGMI since 1996. Any
dividends in excess of the preferred cumulative dividend are allocated 95% to
the preferred stockholder and 5% to the common stockholders. The Operating
Partnership also has advanced funds to GGMI at interest at rates ranging from 8%
to 14% per annum and which mature by 2016. The loans require payment of interest
only until maturity, but GGMI may make principal payments on the loans if it has
sufficient cash flow. GGMI manages, leases, and performs various other services
for the Portfolio Centers and other properties owned by unaffiliated parties.
13 of 29
<PAGE> 14
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
SUMMARIZED INCOME STATEMENT INFORMATION OF UNCONSOLIDATED REAL ESTATE AFFILIATES
The following is summarized income statement information of Unconsolidated Real
Estate Affiliates of the Company for the three and six months ended June 30,
2000 and 1999.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE JUNE
2000 1999 2000 1999
---------- --------- ---------- ----------
Revenues
Tenant rents $ 137,351 $ 92,913 $ 270,364 $ 180,161
Fees and other revenues - - - -
---------- --------- ---------- ----------
Total Revenues 137,351 92,913 270,364 180,161
---------- --------- ---------- ----------
Operating expenses 56,874 38,977 89,215 72,684
Depreciation and
amortization 25,816 14,919 75,934 31,306
---------- --------- ---------- ----------
Operating Income 54,661 39,017 105,215 76,171
Interest expense, net (34,201) (25,793) (68,036) (49,725)
Equity in net income of
unconsolidated real
estate affiliates 1,469 1,447 2,701 2,996
Gain (loss) on property sales - (158) 183 653
Income allocated to minority
interest (63) (202) (151) (341)
---------- --------- ---------- ----------
Net Income $ 21,866 $ 14,311 $ 39,912 $ 29,754
========== ========= ========== ==========
NOTE 4 MORTGAGE NOTES AND OTHER DEBTS PAYABLE
Mortgage notes and other debts payable at June 30, 2000 and December 31, 1999
consisted of the following:
JUNE 30, 2000 DECEMBER 31, 1999
Fixed-Rate debt
Mortgage notes payable $ 1,765,758 $ 1,724,854
Variable-Rate debt
Mortgage notes payable 1,135,077 1,234,680
Credit Facility and bank loan 200,000 160,000
------------ -------------
Total Variable-Rate debt 1,335,077 1,394,680
------------ -------------
Total $ 3,100,835 $ 3,119,534
============ =============
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<PAGE> 15
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
FIXED RATE DEBT
MORTGAGE NOTES PAYABLE
Mortgage notes payable consist primarily of fixed rate non-recourse notes
collateralized by individual or groups of properties. Certain mortgage notes
payable may be prepaid but are generally subject to a prepayment penalty of a
yield-maintenance premium or a percentage of the loan balance.
VARIABLE RATE DEBT
MORTGAGE NOTES PAYABLE
Variable mortgage notes payable consist primarily of the approximate $97,500
outstanding on the construction loan collateralized by Rivertown Crossings as
described below, approximately $130,000 of non-recourse financing collateralized
by a pool of six wholly-owned properties and approximately $858,800 of
collateralized mortgage-backed securities, as described below. The remaining
loans are generally short term in nature and bear interest at a rate per annum
equal to LIBOR (6.1325% at June 30, 2000) plus 90 to 185 basis points. The
Company currently expects to retire or refinance such obligations when due.
MEPC ACQUISITION FINANCING
In June 1998, the Company obtained a loan of approximately $830,000 to acquire a
portfolio of eight regional mall shopping centers (the "MEPC Portfolio"). The
Company repaid approximately $217,000 of this loan on June 10, 1998 from the net
proceeds of the public offering of the Depositary Shares as described in Note 1.
Shortly after the initial acquisition loan funding, the Company obtained from
the lender an option to allow the extension of this loan at maturity at the
lender's then current rates. During 1999 however, the Company reached agreements
in principle with other lenders for full replacement financing and notified the
current lender that the loan would be fully repaid at maturity. Such
notification obligated the Company to pay $8,655 to the lender as a loan
prepayment fee which has been reflected in extraordinary items for the six
months ended June 30, 1999. The remaining MEPC Acquisition Financing was repaid
in 1999 with other secured financing and approximately $441,000 of the proceeds
of the GGP-Ivanhoe CMBS financing described below. In conjunction with the
repayment, the Company expensed previously unamortized deferred financing costs
of approximately $3,280.
COMMERCIAL MORTGAGE-BACKED SECURITIES
In August 1999, the Company issued $500,000 of commercial mortgage-backed
securities, collateralized by the Ala Moana Center. The securities (the "Ala
Moana CMBS") are comprised of notes which bear interest at rates per annum
ranging from LIBOR plus 50 basis points to LIBOR plus 275 basis points (weighted
average equal to LIBOR plus 95 basis points), calculated and payable monthly. In
conjunction with the issuance of the Ala Moana CMBS, the Company arranged for an
interest rate cap agreement, the effect of which limits the maximum interest
rate the Company will be required to pay on the securities to 9% per annum.
Payments received pursuant to the interest rate cap agreement for the six months
ended June 30, 2000 were approximately $6.6, which were reflected as a reduction
in net interest expense.
In September 1999, the Company issued $700,229 of commercial mortgage backed
securities cross-collateralized and cross-defaulted by a portfolio of nine
regional malls and an office complex adjacent to one of the regional malls. The
securities (the "GGP-Ivanhoe CMBS") are comprised of notes which bear interest
at rates per annum ranging from LIBOR plus 52 basis points to LIBOR
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<PAGE> 16
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
plus 325 basis points (weighted average equal to LIBOR plus approximately 109
basis points), calculated and payable monthly. In conjunction with the issuance
of the GGP-Ivanhoe CMBS, the Company arranged for an interest rate cap
agreement, the effect of which limits the maximum interest rate the Company will
be required to pay on the securities to 9.03% per annum. Payments received
pursuant to the interest rate cap agreement for the six months ended June 30,
2000 were approximately $97, which were reflected as a reduction in net interest
expense. The $392,000 interim loan collateralized by the USPPI portfolio was
repaid with $341,019 of the proceeds from the sale of the GGP-Ivanhoe CMBS and
capital contributions by the Company (from its Credit Facility) and from Ivanhoe
in the ratio of their respective stock ownership percentages. The remaining
proceeds from the sale of the GGP-Ivanhoe CMBS along with other interim
financing proceeds were used by the Company to repay the $441,000 remaining
balance on the MEPC Acquisition Financing.
CREDIT FACILITY
The Company's $200,000 unsecured revolving credit facility was originally
scheduled to mature on July 31, 2000. On June 23, 2000, the Company prepaid all
remaining outstanding principal amounts and terminated the Credit Facility. The
Credit Facility bore interest at a floating rate per annum equal to LIBOR plus
80 to 120 basis points depending upon the Company's leverage ratio. The Credit
Facility was subject to financial performance covenants including debt-to-market
capitalization, minimum earnings before interest, taxes, depreciation and
amortization ("EBITDA") ratios and minimum equity values.
On July 31, 2000 the Company obtained a new unsecured revolving credit facility
(the "Revolver") in a maximum aggregate principal amount of $135,000. The
Company's initial draw under the Revolver was $130,000. The Revolver has a
maturity of July 31, 2003 and bears interest at a floating rate per annum equal
to LIBOR plus 100 to 190 basis points, depending on the Company's average
leverage ratio. The Revolver is subject to financial performance covenants
including debt to value and net worth ratios, EBITDA ratios and minimum equity
values.
INTERIM FINANCING
In January 1999, the Company obtained an additional $30,000 unsecured bank loan,
which bore interest at a floating market rate (average rate equal to 6.46% per
annum). The Company had obtained in November 1998 a thirteen-month loan in the
principal amount of $55,000 collateralized by a negative pledge (i.e., the
promise not to encumber) of Coastland Center. These loans were repaid on May 21,
1999 with a ten-year 7.0% mortgage loan in the principal amount of $87,000
collateralized by Coastland Center.
In January 1999, the Company obtained an additional $83,655 floating rate (7.49%
at June 30, 1999) interim loan which was originally scheduled to mature June 1,
1999. During May 1999, the Company obtained a new $45,000 mortgage loan
collateralized by The Crossroads Mall. The loan partially repaid the interim
loan and the remaining balance, approximately $38,655, was extended and repaid
in October 1999 with a portion of the proceeds of a six property $130,000
two-year non-recourse mortgage pool financing.
In April 1999, the Company obtained an additional $25,000 bank loan, partially
secured by Park Mall in Tucson, Arizona. In October 1999, the loan was increased
to $50,000. The loan matures September 1, 2000, bears interest at a rate per
annum of LIBOR plus 175 basis points and is expected to be replaced by maturity
with a $90,000 construction loan facility to be secured by Park
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<PAGE> 17
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
Mall which is currently undergoing extensive renovation, with the final phase of
renovation expected to be completed in 2001.
In January 2000, the Company obtained a new $200,000 unsecured short-term bank
loan. The Company's initial draw under this loan was $120,000 in January, 2000
and the remaining available amounts were fully drawn at June 30, 2000. Loan
proceeds were used to fund ongoing redevelopment projects and repay the
remaining balance of $83,000 on an interim loan obtained in September 1999. The
bank loan bore interest at a rate per annum of LIBOR plus 150 basis points and
was refinanced on August 1, 2000 with the Revolver and the term loan described
below.
On August 1, 2000, the Company obtained an unsecured bank term loan (the "Term
Loan") of $100,000. Term Loan proceeds were used to fund ongoing redevelopment
projects and repay a portion of the remaining balance of the bank loan described
above. The Term Loan has a maturity of July 31, 2003 and bears interest at a
rate per annum of LIBOR plus 100 to 170 basis points depending on the Company's
average leverage ratio.
CONSTRUCTION LOAN
During April 1999 the Company received $30,000 representing the initial loan
draw on an $110,000 construction loan facility. The facility is secured by and
will provide financing for the RiverTown Crossings Mall development (including
outparcel development) in Grandville (Grand Rapids), Michigan. The construction
loan provides for periodic funding as construction and leasing continues which
currently bear interest at a rate per annum of LIBOR plus 150 basis points. As
of June 30, 2000 additional loan draws of approximately $67,500 had been made
and the final $12,500 was drawn on the loan in July 2000. Interest is due
monthly but during 1999 were added to the periodic loan draws. The loan
matures on June 29, 2001 and the Company currently intends to refinance the loan
at or prior to maturity with a non-recourse long-term mortgage loan.
LETTERS OF CREDIT
As of June 30, 2000 and December 31, 1999, the Operating Partnership had
outstanding letters of credit of $7,934, primarily in connection with special
real estate assessments and insurance requirements. In addition at June 30, 2000
the Company has a letter of credit of approximately $30,925 related to the
funding of the Ala Moana CMBS and pending construction projects at the Ala Moana
Center.
NOTE 5 DISTRIBUTIONS PAYABLE
The following is a chart of the previous common and preferred distributions for
the Company paid in 1999 and 2000. As described in Note 1, General Growth's
preferred stock dividends to its preferred stockholders were in the same amount
as the Operating Partnership's distributions to General Growth on the same dates
with respect to the Preferred Units held by General Growth.
17 of 29
<PAGE> 18
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
COMMON DISTRIBUTIONS
-------------------------------------------------------------------------------
GENERAL OPERATING
GROWTH PARTNERSHIP
DECLARATION AMOUNT PER RECORD PAYMENT STOCKHOLDERS LIMITED PARTNERS
DATE SHARE DATE DATE AMOUNT AMOUNT
---- ----- ---- ---- ------ ------
06/14/00 $ 0.51 07/06/00 07/31/00 $ 26,541 $ 10,090
03/22/00 0.51 04/06/00 04/28/00 26,483 10,101
12/13/99 0.51 01/06/00 01/31/00 26,481 10,097
09/22/99 0.49 10/05/99 10/29/99 25,322 9,701
06/18/99 0.49 07/02/99 07/30/99 19,651 9,712
03/18/99 0.49 04/05/99 04/30/99 19,136 9,712
12/17/98 0.47 01/06/99 01/29/99 18,330 9,309
PREFERRED DISTRIBUTIONS
----------------------------------------------
RECORD PAYMENT AMOUNT PER
DATE DATE SHARE
---- ---- -----
07/06/00 07/14/00 $0.4531
04/06/00 04/14/00 0.4531
01/06/00 01/14/00 0.4531
10/05/99 10/15/99 0.4531
07/02/99 07/15/99 0.4531
04/05/99 04/15/99 0.4531
01/06/99 01/15/99 0.4531
NOTE 6 MORTGAGE NOTE RECEIVABLE
During September 1999, St. Cloud Funding, L.L.C., a wholly-owned subsidiary of
the Operating Partnership ("St. Cloud Funding"), agreed to advance approximately
$31,000 to an unaffiliated developer in the form of a second mortgage loan
(bearing interest at 15% per annum) collateralized by such developer's ownership
interest in Crossroads Center in St. Cloud (Minneapolis), Minnesota.
Contemporaneously with the loan, St. Cloud Mall L.L.C., all of the interests of
which are owned by the Operating Partnership and the Company ("St. Cloud Mall"),
was granted an option to acquire the property in 2002. The loan had a scheduled
maturity of June 1, 2004 which was accelerated in February 2000 to April 28,
2000. In conjunction with the maturity date modification, a put option agreement
was executed which would permit the borrower (after March 15, 2000) to require
St. Cloud Mall to purchase the property. In addition, St. Cloud Mall's purchase
option was advanced to April 2000. On March 15, 2000 the borrower notified St.
Cloud Mall of the exercise of the put option. Pursuant to the put option
agreement, on April 26, 2000, St. Cloud Mall purchased the property at a price
equal to approximately $2,000 plus the then outstanding balances of the first
mortgage (approximately $46,600) and St. Cloud Funding's second mortgage.
NOTE 7 COMMITMENTS AND CONTINGENCIES
In the normal course of business, from time to time, the Company is involved in
legal actions relating to the ownership and operations of its properties. In
management's opinion, the liabilities if any, that
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<PAGE> 19
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
may ultimately result from such legal actions are not expected to have a
materially adverse effect on the consolidated financial position, results of
operations or liquidity of the Company.
The Company periodically enters into contingent agreements for the acquisition
of properties. Each acquisition is subject to satisfactory completion of due
diligence and, in the case of developments, completion of the project.
NOTE 8 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May, 1998, the Emerging Issues Task Force ("EITF") of the FASB issued a
consensus opinion entitled "Accounting for Contingent Rent in Interim Financial
Periods" ("EITF 98-9"). EITF 98-9 was effective as of May 21, 1998 and provided
that rental income should be deferred in interim periods by the lessor if the
triggering events that create contingent rent have not yet occurred. The Company
is entitled to receive contingent rents because a majority of the tenant leases
provide for additional rent computed as a percentage of tenant sales revenues
above certain annual thresholds (predominantly computed on a calendar year
basis). The Company had previously accrued, on an interim basis, such overage
rents based on the prorated annual overage rent estimated to be due from
tenants. During the fourth quarter of 1998, EITF 98-9 was withdrawn and,
pursuant to the guidance issued by the EITF, the Company, effective January 1,
1999, reverted back to the original policy of accruing percentage rents on an
estimated basis. During December 1999, the Securities and Exchange Commission
(the "SEC") issued Staff Accounting Bulletin 101 "Revenue Recognition". This
pronouncement, as subsequently extended to all publicly traded companies by the
EITF, among other things, effectively reinstated the provisions of EITF 98-9.
The Company has applied this revised accounting effective January 1, 2000. The
Company believes that there is no material cumulative effect on the Company's
financial position as of the date of adoption of this revised accounting and
that the only material effect of this pronouncement will be to shift the
Company's recognition, including amounts from the operations of the
Unconsolidated Real Estate Affiliates, of major portions of overage rent from
interim quarters to the fourth quarter of 2000 and subsequent years. The
Company's cash collections of overage rents will not be affected by this
accounting recognition change. The Company estimates that it would have
recognized approximately $16,050 of additional overage rent in the six months
ended June 30, 2000 if this change in accounting recognition of overage rent had
not been mandated.
On June 1, 1998 the FASB issued Statement No. 133 "Accounting for Derivative
Instruments and Hedging Activities". The new standard is effective for fiscal
years beginning after June 15, 2000 as provided by FASB Statement No. 137 issued
in July, 1999. The Company does not currently have any investments in
derivatives, and the Company's only hedging activity is the cash value hedge
represented by its cap agreements relating to its commercial mortgage-backed
securities (Note 4). The interest rate cap agreements place a limit on the
effective rate of interest the Company will bear on such floating rate
obligations. The Company has concluded that these cap agreements are highly
effective in achieving its objective of eliminating its exposure to variability
in cash flows relating to these floating rate obligations when LIBOR rates
exceed the strike rates of the cap agreements. Therefore, the Company does not
believe there will be a material effect of adoption on the Company's financial
statements when the standard is effective.
In March 2000 the FASB issued Statement of Accounting Standards Interpretation
44, Accounting for Certain Transactions Involving Stock Compensation
("Interpretation 44"). Interpretation 44 is generally effective for new stock
option grants beginning July 1, 2000. However, requirements related to the
definition of an employee apply to new awards granted after December 15, 1998.
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<PAGE> 20
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
Further, the FASB determined that any modifications to current accounting as a
result of this guidance are to be recorded prospectively. General Growth has
previously granted stock options to its employees, directors and to employees of
its currently unconsolidated subsidiary, GGMI. Under the terms of the
Interpretation, any awards to GGMI employees are considered awards to
non-employees. Although the Company has not fully assessed the impact of
Interpretation 44 on its consolidated financial statements, it currently
believes that the adoption of Interpretation 44 will not have a material impact
on the Company's consolidated financial position or consolidated results of
operations.
20 of 29
<PAGE> 21
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All references to numbered Notes are to specific footnotes to the Consolidated
Financial Statements of the Company included in this quarterly report and which
descriptions are hereby incorporated herein by reference. The following
discussion should be read in conjunction with such Consolidated Financial
Statements and related Notes. On June 30, 2000, the Company owned 100% of the
fifty-three Wholly-Owned Centers, 50% of the stock of GGP/Homart, 50% of the
membership interest in GGP/Homart II, 51% of the stock of GGP Ivanhoe, 51% of
the stock of GGP Ivanhoe III, 50% of Quail Springs Mall and Town East Mall, and
a non-voting preferred stock ownership interest (representing 95% of the equity
interest) in GGMI. GGP/Homart owns interests in twenty-three shopping centers,
GGP/Homart II owns interests in seven shopping centers (including one under
construction), GGP Ivanhoe owns interests in two shopping centers, and GGP
Ivanhoe III owns interests in eight shopping centers.
The Mall Store and Free-standing Store portions of the centers in the Company
Portfolio which were not undergoing redevelopment on June 30, 1999 had an
occupancy of approximately 87.4% as of such date. On June 30, 2000, the Mall
Store and Free-standing Store portions of the centers in the Company Portfolio
which were not undergoing redevelopment were approximately 89.1% occupied as of
such date, representing an increase in occupancy percentage of 1.7% over 1999.
Total annualized sales averaged $350 per square foot for the Company Portfolio
in the six months ended June 30, 2000. In the six months ended June 30, 2000,
total mall store sales for the Company Portfolio increased by 8.1% over the same
period in 1999. Comparable mall store sales are sales of those tenants that were
open the previous 12 months. Therefore, comparable mall store sales in the six
months ended June 30, 2000 are of those tenants that were operating in the six
months ended June 30, 1999. Comparable mall store sales in the six months ended
June 30, 2000 increased by 5.1% over the same period in 1999.
The average Mall Store rent per square foot from leases that expired in the six
months ended June 30, 2000 was $29.29. The Company Portfolio benefited from
increasing rents inasmuch as the average Mall Store rent per square foot on new
and renewal leases executed during this same period was $34.63, or $5.34 per
square foot above the average for expiring leases.
FORWARD-LOOKING INFORMATION
Forward looking statements contained in this Quarterly Report on Form 10-Q may
include certain forward-looking information statements, within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including (without limitation)
statements with respect to anticipated future operating and financial
performance, growth and acquisition opportunities and other similar forecasts
and statements of expectation. Words such as "expects", "anticipates",
"intends", "plans", "believes", "seeks", "estimates" and "should" and variations
of these words and similar expressions, are intended to identify these
forward-looking statements. Forward-looking statements made by the Company and
its management are based on estimates, projections, beliefs and assumptions of
management at the time of such statements and are not guarantees of future
performance. The Company disclaims any obligation to update or revise
21 of 29
<PAGE> 22
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
any forward-looking statement based on the occurrence of future events, the
receipt of new information or otherwise.
Actual future performance, outcomes and results may differ materially from those
expressed in forward-looking statements made by the Company and its management
as a result of a number of risks, uncertainties and assumptions. Representative
examples of these factors include (without limitation) general industry and
economic conditions, interest rate trends, cost of capital and capital
requirements, availability of real estate properties, competition from other
companies and venues for the sale/distribution of goods and services, changes in
retail rental rates in the Company's markets, shifts in customer demands, tenant
bankruptcies or store closures, changes in vacancy rates at the Company's
properties, changes in operating expenses, including employee wages, benefits
and training, governmental and public policy changes, changes in applicable
laws, rules and regulations (including changes in tax laws), the ability to
obtain suitable equity and/or debt financing, and the continued availability of
financing in the amounts and on the terms necessary to support the Company's
future business.
Company revenues are primarily derived from fixed minimum rents, overage rents
and recoveries of operating expenses from tenants. Inasmuch as the Company's
financial statements reflect the use of the equity method to account for its
investments in GGP/Homart, GGP/Homart II, GGP Ivanhoe, GGP Ivanhoe III, Quail
Springs Mall and Town East Mall and GGMI, the discussion of results of
operations of the Company below relates primarily to the revenues and expenses
of the Wholly-Owned Centers.
RESULTS OF OPERATIONS OF THE COMPANY
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
During calendar 1999, the Company opened Rivertown Crossings and purchased
interests in the following Wholly-Owned Centers: The Crossroads, Ala Moana, and
Baybrook. In addition, the Company contributed its 100% interests in Stonebriar,
Northbrook Court, Natick, and Altamonte to GGP/Homart II, an unconsolidated
entity. During April 2000, the Company purchased an 100% interest in Crossroads
Center. For purposes of the following discussion of the results of operations,
the net effect of acquisitions will include the effect of the new mall opening,
the effect of the new acquisitions in 1999 and 2000 and the effect of the three
operating properties contributed to GGP/Homart II.
Total revenues for the three months ended June 30, 2000 were $165.0 million,
which represents an increase of $29.1 million or approximately 21.4% from $135.9
million in the three months ended June 30, 1999. The majority of the increase is
from the net effect of acquisition of properties. Minimum rent for the three
months ended June 30, 2000 increased by $18.6 million or 21.5% from $86.7
million in the comparable period in 1999 to $105.3 million. The net effect of
acquisition of properties generated the majority of such increase in minimum
rents. Expansion space, specialty leasing and occupancy increases at the
comparable centers (properties owned for the entire time during the three months
ended June 30, 1999 and 2000) accounted for the remaining increase in minimum
rents. Tenant recoveries increased by $12.5 million or 30.6% from $40.8 million
to $53.3 million for the three months ended June 30, 2000. The majority of the
increase was generated by the net effect newly aquired properties. For the three
months ended June 30, 2000, overage rents decreased to $3.1 million from $5.3
million in 1999. The decrease is primarily attributable to the change in
accounting for overage rents effective January 1, 2000, as more fully described
in Note 8.
Total expenses, including depreciation and amortization, increased by
approximately $12.1 million, from $72.9 million in the three months ended June
30, 1999 to $85.0 million in the three months
22 of 29
<PAGE> 23
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
ended June 30, 2000. For the three months ended June 30, 2000, property
operating expenses increased by $5.3 million or 16.8% from $31.6 million in 1999
to $36.9 million in the second quarter of 2000, substantially all of which is
attributable to the net effect of new acquisitions. The remainder is due to
increases at the comparable centers. Depreciation and amortization increased by
$6.6 million or 25.6% over the same period in 1999. The majority of the increase
in depreciation and amortization was generated by the net effect of newly
acquired properties. Management fees to affiliates increased by approximately
$0.3 million or 23.1% over the same period in 1999.
Net interest expense for the three months ended June 30, 2000 was $51.3 million,
an increase of $14.0 million or 37.5% from $37.3 million in the three months
ended June 30, 1999. The net effect of acquisition of new properties was
responsible for approximately $6.7 million of the increase. The remainder is due
to increased debt and interest rates at the comparable centers.
Equity in net income of unconsolidated affiliates in the three months ended June
30, 2000 increased by approximately $4.5 million to earnings of $9.0 million in
2000, from $4.5 million in the three months ended June 30, 1999. The Company's
equity in the earnings of GGP/Homart decreased approximately $1.8 million,
primarily due to an increase in debt and related interest expense. The formation
of GGP/Homart II resulted in earnings of approximately $4.1 million for the
three months ended June 30, 2000. The Company's equity in the earnings of GGMI
resulted in an increase of approximately $1.9 million, primarily due to an
increase of fee revenue.
Gain on sale in the three months ended June 30, 1999, represents the gain on the
sale of outparcel land to a major tenant at Park Mall.
RESULTS OF OPERATIONS OF THE COMPANY
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Total revenues for the six months ended June 30, 2000 were $327.5 million, which
represents an increase of $57.3 million or approximately 21.2% from $270.2
million in the six months ended June 30, 1999. Substantially all of the increase
is from the net effect of acquisition of properties. Minimum rent for the six
months ended June 30, 2000 increased by $36.8 million or 21.6% from $170.5
million in the comparable period in 1999 to $207.3 million. The net effect of
acquisition of properties generated the majority of such increase in minimum
rents. Expansion space, specialty leasing and occupancy increases at the
comparable centers (properties owned for the entire time during the six months
ended June 30, 1999 and 2000) accounted for the remaining increase in minimum
rents. Tenant recoveries increased by $22.8 million or 27.5% from $82.9 million
to $105.7 million for the six months ended June 30, 2000. Substantially all of
the increase was generated by the net effect of properties which were acquired.
For the six months ended June 30, 2000, overage rents decreased to $ 5.8 million
from $9.2 million in 1999. The net effect of acquisitions contributed an
increase of approximately $1.6 million in overage rent. The decrease is
primarily attributable to the change in accounting for overage rents in the six
months ended June 30, 2000 as more fully described in Note 8.
Total expenses, including depreciation and amortization, increased by
approximately $26.5 million, from $144.8 million in the six months ended June
30, 1999 to $ 171.3 million in the six months ended June 30, 2000. For the six
months ended June 30, 2000, property operating expenses increased by $14.5
million or 23.1% from $62.8 million in 1999 to $77.3 million in the first
quarter of 2000, substantially all of which is attributable to the net effect of
the new acquisitions. Depreciation and amortization increased by $11 million or
21.7% over the same period in 1999. Approximately $4.1 million of the increase
in depreciation and amortization was generated at comparable centers. The
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<PAGE> 24
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
remaining $6.9 million was from the net effect of newly acquired properties.
Management fees to affiliates was approximately $1.4 million or 53.8% higher
than in the six months ended June 30, 1999.
Net interest expense for the six months ended June 30, 2000 was $99.3 million,
an increase of $22.9 million or 30.0% from $76.4 million in the six months ended
June 30, 1999. Debt incurred in connection with the acquisition of new
properties was responsible for substantially all of such increase.
Equity in net income of unconsolidated affiliates in the six months ended June
30, 2000 increased by approximately $8.8 million to earnings of $17.5 million in
2000, from $8.7 million in the six months ended June 30, 1999. The Company's
equity in the earnings of GGP/Homart decreased approximately $3.1 million,
primarily due to the gain recognized by GGP/Homart on its May, 1999 sale of its
interest in the Rolling Oaks Mall in San Antonio, Texas. This decrease is
partially offset by an increase in average property occupancy, an increase in
the ownership interest of GGP/Homart in The Parks at Arlington and an increase
in the Company's ownership interest in GGP/Homart in 2000 versus 1999. The
Company's equity in the earnings of GGMI resulted in an increase of
approximately $5.5 million, primarily due to the write-off of terminated
third-party management contracts in 1999. The formation of GGP/Homart II
resulted in earnings of approximately $7.7 million for the six months ended June
30, 2000.
Gain on sale in the six months ended June 30, 1999, represents the gain on the
sale of outparcel land to a major tenant at Park Mall.
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
As of June 30, 2000, the Company held approximately $40.3 million of
unrestricted cash and cash equivalents. The Company uses operating cash flow as
the principal source of internal funding for short-term liquidity and capital
needs such as tenant construction allowances and minor improvements made to
individual properties that are not recoverable through common area maintenance
charges to tenants. External funding alternatives for longer-term liquidity
needs such as acquisitions, new development, expansions and major renovation
programs at individual centers include construction loans, mini-permanent loans,
long-term project financing, joint venture financing with institutional
partners, additional Operating Partnership level or Company level equity
investments, unsecured Company level debt or secured loans collateralized by
individual shopping centers. In addition, the Company has access to the public
equity and debt markets through a currently effective shelf registration
statement under which up to $329.2 million in equity or debt securities may be
issued from time to time. The Company also has a revolving credit facility and
term loans (Note 4) with an aggregate balance as of the date of this report of
approximately $230 million, maturing on July 31, 2003, which the Company
currently anticipates it will be able to increase up to $550 million as
necessary.
As of June 30, 2000, the Company had consolidated debt of approximately $3,101
million, of which $1,766 million is comprised of debt bearing interest at a
fixed rate, with the remaining $1,335
24 of 29
<PAGE> 25
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
million bearing interest at floating rates. Reference is made to Note 4 and Item
3 below for additional information regarding the Company's debt and the
potential impact on the Company of interest rate fluctuations.
The following summarizes certain significant investment and financing
transactions currently planned or completed since December 31,1999:
The Company had previously advanced approximately $31 million collateralized by
a second mortgage on the Crossroads Center in St. Cloud (Minneapolis),
Minnesota. In connection with the second mortgage (as modified in February 2000)
the Company acquired the property in April 2000 as more further described in
Note 6.
In January 2000, the Company obtained a new $200 million unsecured short-term
bank loan. The Company's initial draw under this loan was $120 million which was
used to fund ongoing redevelopment projects and repay an $83 million interim
loan obtained in September 1999. This loan bore interest at LIBOR plus 150 basis
points and the remaining available amounts were drawn by June 30, 2000. The
loan was repaid August 1, 2000 from the proceeds of a new revolving credit
facility and the $100 million term loan described below.
In May 2000, the Company obtained approximately $170.6 million of net proceeds
through the issuance of preferred units of membership interest as more fully
described in Note 1. These units provide for annual 8.95% preferred
distributions and have a liquidation preference of $175 million. The net
proceeds were used primarily to reduce the Company's outstanding short-term
floating rate debt.
On August 1, 2000, the Company completed the refinancing of its Credit Facility.
The Company's initial draw under the Revolver was $130 million. The Revolver has
a maturity of July 31, 2003 and bears interest at a rate per annum equal to
LIBOR plus 100 to 190 basis points depending on the Company's average leverage
ratio. In addition, the Company obtained an unsecured bank term loan of
$100,000. The Term Loan has a maturity of July 31, 2003 and bears interest at a
rate per annum of LIBOR plus 100 to 170 basis points depending on the Company's
average leverage ratio.
Approximately $50 million of the Company's debt is scheduled to mature in the
remainder of 2000. Although final agreements to refinance all such loan amounts
have not yet been reached, the Company anticipates that all of its debt will be
repaid on a timely basis. Other than as described above or in conjunction with
possible future acquisitions, there are no current plans to incur additional
debt or raise equity capital. If additional capital is required, the Company
believes that it can increase the amounts available under the Revolver or term
loans, obtain an interim bank loan, obtain additional mortgage financing on
under-leveraged assets, enter into new joint venture partnership arrangements or
raise additional debt or equity capital. However, there can be no assurance that
the Company can obtain such financing on satisfactory terms. The Company will
continue to monitor its capital structure, investigate potential joint venture
arrangements and purchase additional properties if they can be acquired and
financed on terms that the Company reasonably believes will enhance long-term
stockholder value. When property operating cash flow has been increased, the
Company anticipates the refinancing of portions of its long-term floating rate
debt with pooled or property-specific non-recourse fixed-rate mortgage
financing.
Net cash provided by operating activities was $134.8 million in the first six
months of 2000, an increase of $25.9 million from $108.9 million in the same
period in 1999. Net income before
25 of 29
<PAGE> 26
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
extraordinary items and allocations to the minority interest increased $17.1
million, which was represented primarily by the earnings contributed by
acquisitions completed in 1999 and 2000.
Net cash used by investing activities was $142.2 million in the first six months
of 2000 compared to $191.7 million of cash used in the first six months of 1999.
Cash flow from investing activities was impacted by the lower volume of
development and improvements to consolidated real estate properties in the first
six months of 2000, as compared to the first six months in 1999 as the ownership
(and resulting development activities) of Stonebriar Centre was transferred to
GGP/Homart II in November, 1999.
Financing activities contributed cash of $22.1 million in the first six months
of 2000, compared to a source of cash of $81.8 million in 1999. A major
contributing factor to the variance in the cash provided from financing activity
is that financing from mortgages and other debt, net of repayments of principal
on mortgage debt, had a negative impact of $65.3 million in the first six months
of 2000 versus a positive impact of $150.9 million in the first six months of
1999. The additional financing in 1999 was used to fund the acquisitions,
developments and redevelopment of real estate discussed above and in Note 2.
In order to remain qualified as a real estate investment trust for federal
income tax purposes, the Company must distribute 100% of capital gains and at
least 95% of its ordinary taxable income to stockholders. The following factors,
among others, will affect operating cash flow and, accordingly, influence the
decisions of the Board of Directors regarding distributions: (i) scheduled
increases in base rents of existing leases; (ii) changes in minimum base rents
and/or percentage rents attributable to replacement of existing leases with new
or renewal leases; (iii) changes in occupancy rates at existing centers and
procurement of leases for newly developed centers; and (iv) the Company's share
of operating cash flow generated by GGMI, the Unconsolidated Real Estate
Affiliates and distributions there from, less oversight costs and debt service
on additional loans that have been or will be incurred. The Company anticipates
that its operating cash flow, and potential new debt or equity from future
offerings, new financings or refinancings will provide adequate liquidity to
conduct its operations, fund general and administrative expenses, fund operating
costs and interest payments and allow distributions to the Company's preferred
and common stockholders in accordance with the requirements of the Internal
Revenue Code of 1986, as amended, for continued qualification as a real estate
investment trust and to avoid any Company level federal income or excise tax. In
addition, the Tax Relief Extension Act of 1999 will be effective January 1,
2001. Two key provisions of this tax law change will impact future Company
operations: the availability of a taxable REIT subsidiary which may be wholly
owned directly by a REIT and a reduction in the required level of distributions
by a REIT to 90% of ordinary taxable income. The Company is still evaluating the
impact of these changes. A taxable REIT subsidiary, wholly owned by the REIT as
permitted under new law commencing in 2001, will be able to retain a larger
amount of operating cash flow for reinvestment purposes.
The Internet and electronic retailing are growing at significant rates. In 1999,
the Company launched a new website - Mallibu.com - and has engaged in a number
of other e.business initiatives. In one such initiative, the Company expects to
have the majority of its regional shopping centers wired for broadband
connectivity by December 31, 2000. Although the amount of retail sales conducted
solely via the Internet is expected to rise in the future, the Company believes
that traditional retailing and "e-tailing" will converge such that the regional
mall will continue to be a vital part of the overall mix of shopping
alternatives for the consumer.
26 of 29
<PAGE> 27
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
As more fully described in Note 8, the FASB, EITF and the AICPA have issued
certain statements, which are effective for the current or subsequent year. The
Company does not expect a significant impact on its annual reported operations
due to the application of such new statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has not entered into any transactions using derivative commodity
instruments. The Company is subject to market risk associated with changes in
interest rates. The economy is currently in a period of rising interest rates.
Interest rate exposure is principally limited to the $1,335 million of debt of
the Company outstanding at June 30, 2000 that is priced at interest rates that
float with the market. However, approximately $858 million of such floating rate
consolidated debt is comprised of commercial mortgage-backed securities which
are subject to interest rate cap agreements, the effect of which is to limit the
interest rate the Company would be required to pay on such debt to no more than
approximately 9% per annum. Therefore, a 25 basis point movement in the interest
rate on the floating rate debt would result in an approximate $3.18 million
annualized increase or decrease in interest expense and cash flows. The
remaining debt is fixed rate debt. The Company has an ongoing program of
refinancing its floating and fixed rate debt and believes that this program
allows it to vary its ratio of fixed to floating rate debt to respond to
changing market rate conditions. Reference is made to Item 2 above and Note 4
for additional debt information.
27 of 29
<PAGE> 28
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At its Annual Meeting of Stockholders held on May 9, 2000, the stockholders
voted upon the re-election of Morris Mark and Robert Michaels as Directors, and
the ratification of the appointment of PricewaterhouseCoopers LLP as Independent
Auditors. A total of 51,927,576 shares were eligible to vote on each matter
presented at the Annual Meeting, which were approved by the following votes of
stockholders:
NUMBER OF SHARES NUMBER OF SHARES
MATTER FOR WITHHELD
-------------------------------------------------------------------------------
1. (a) Re-elect Morris Mark 44,165,631 229,038
(b) Re-elect Robert Michaels 38,856,543 5,538,126
NUMBER OF SHARES NUMBER OF
FOR SHARES AGAINST ABSTAIN
-------------------------------------------------------------------------------
2. Appointment of
PricewaterhouseCoopers LLP
as Independent Auditors 44,081,533 38,347 274,789
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibit Index
(b), (c) Reports on Form 8-K and proforma information
The following reports on Form 8-K have been filed by the Company during the
quarter covered by this report:
1. Current Report on Form 8-K dated May 9, 2000 describing under
Item 5. the acquisition of Crossroads Center in St. Paul, Minnesota.
No financial statements were required to be filed with the report.
2. Current Report on Form 8-K dated June 13, 2000 describing under
Item 5. the issuance of 700,000 cumulative redeemable preferred
units of membership interest of GGPLP L.L.C., yielding net
proceeds to the Company of approximately $170.6 million. No
financial statements were required to be filed with the report.
28 of 29
<PAGE> 29
GENERAL GROWTH PROPERTIES, INC
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL GROWTH PROPERTIES, INC.
(Registrant)
Date: August 9, 2000 by: /s/: Bernard Freibaum
---------------------------------------
Bernard Freibaum
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
29 of 29
<PAGE> 30
EXHIBIT INDEX
2(a) Amended and Restated Stock Purchase Agreement, dated as of October 16,
1995, by and among Sears, Roebuck and Co., Homart Development Co., Homart Newco
One, Inc. and GGP/Homart, Inc.(1)
2(b) Amendment No. 1 to Amended and Restated Stock Purchase Agreement,
dated as of December 22, 1995, by and among Sears, Roebuck and Co., Homart
Development Co., Homart Newco One, Inc. and GGP/Homart, Inc.(1)
2(c) Real Estate Purchase Agreement, dated as of July 31, 1995, by and
among Sears, Roebuck and Co., Homart Development Co. and GGP/Homart, Inc.(1)
2(d) Amendment No. 1 to Real Estate Purchase Agreement, dated as of October
16, 1995, by and among Sears, Roebuck and Co., Homart Development Co. and
GGP/Homart, Inc.(1)
2(e) Amendment No. 2 to Real Estate Purchase Agreement, dated as of
December 22, 1995, by and among Sears, Roebuck and Co., Homart Development Co.
and GGP/Homart, Inc.(1)
2(f) Mall Purchase Agreement, dated as of December 22, 1995, by and among
Sears, Roebuck and Co., Homart Development Co. and General Growth
Properties-Natick Limited Partnership.(1)
2(g) Contribution Agreement dated December 6, 1996, between Forbes/Cohen
Properties, a Michigan general partnership, and GGP Limited Partnership, a
Delaware limited partnership.(2)
2(h) Contribution Agreement dated December 6, 1996, between Lakeview Square
Associates, a Michigan general partnership, and GGP Limited Partnership, a
Delaware limited partnership.(2)
2(i) Contribution Agreement dated December 6, 1996, between Jackson
Properties, a Michigan general partnership, and GGP limited Partnership, a
Delaware limited partnership.(2)
2(j) Sale and Contribution Agreement dated June 19, 1997, between CA
Southlake Investors, Ltd., a Georgia limited partnership, and GGP Limited
Partnership, a Delaware limited partnership.(10)
2(k) Contribution Agreement dated June 10, 1997, among Atlantic Freeholds
II, a Nevada general partnership, Town East Mall, L.P., a Delaware limited
partnership, and Town East Mall Partnership, a Texas general partnership.(10)
2(l) Purchase and Sale Agreement dated as of March 22, 1997, between
Century Plaza Co., an Alabama general partnership, and Century Plaza L.L.C., a
Delaware limited liability company. (10)
2(m) Real Estate Purchase Agreement dated March 12, 1997, between Champaign
Venture, an Illinois general partnership, and Champaign Market Place L.L.C., a
Delaware limited liability company. (10)
2(n) Stock Purchase Agreement dated as of April 17, 1998 and amended June
2, 1998, among MEPC PLC, MEPC North American Properties Limited, U.K.-American
Holdings Limited and GGP Limited Partnership. (16)
<PAGE> 31
2(o) Purchase and Sale Agreement dated May 8, 1998, among Grosvenor
International Limited, P.I.C. Investments, Northbrook Court I L.L.C. and
Northbrook Court II L.L.C. (17)
2(p) Merger Agreement dated May 14, 1998, among GGP Limited Partnership,
GGP Acquisition L.L.C. and U.S. Prime Property, Inc. (17)
2(q) Sale and Contribution Agreement dated April 2, 1998, between
Southwest Properties Venture and GGP Limited Partnership. (18)
2(r) Contribution and Exchange Agreement dated as of July 10, 1998 (the
"Contribution Agreement") among Nashland Associates, HRE Altamonte, Inc.,
Altamonte Springs Mall L.P., and GGP Limited Partnership. (21)
2(s) Purchase and Sale Agreement and Joint Escrow Instructions dated as of
August 21, 1998 by and between Spring Hill Mall Partnership (seller) and Spring
Hill Mall L.L.C., (purchaser). (22)
2(t) Purchase and Sale Agreement dated as of the 18th day of September,
1998 by and between Coastland Center Joint Venture (seller) and Coastland
Center, L.P. (purchaser). (23)
2(u) Purchase and Sale Agreement dated as of May 3, 1999, among D/E Hawaii
Joint Venture, GGP Limited Partnership and General Growth Properties, Inc. (27)
2(v) Agreement of Purchase and Sale, dated as of July 27, 1999, among Oak
View Mall Corporation, a Delaware corporation, and Oak View Mall, L.L.C., a
Delaware limited liability company. (28)
2(w) Agreement of Purchase and Sale, dated as of July 22, 1999 between
General Growth Properties, Inc., a Delaware corporation (the "Company"), and
RREEF USA Fund-III, a California group trust. (28)
2(x) Operating Agreement, dated November 10, 1999, between GGP Limited
Partnership, a Delaware limited partnership, The Comptroller of the State of New
York as Trustee of the Common Retirement Fund ("NYSCRF"), and GGP/Homart II
L.L.C. a Delaware limited liability company ("GGP/ Homart II"). (28)
2(y) Contribution Agreement dated November 10, 1999, by and between GGP
Limited Partnership, a Delaware limited partnership (the "Operating
Partnership"), and GGP/Homart II (Altamonte Mall). (29)
2(z) Contribution Agreement dated November 10, 1999, by and between the
Operating Partnership and GGP/Homart II (Northbrook Court). (29)
2(aa) Contribution Agreement dated November 10, 1999, by and between the
Operating Partnership and GGP/Homart II (Natick Trust). (29)
2(bb) Contribution Agreement dated November 10, 1999, by and between the
Operating Partnership and GGP/Homart II (Stonebriar Centre). (29)
2(cc) Contribution Agreement dated November 10, 1999, by and between NYSCRF
and GGP/Homart II (Carolina Place). (29)
<PAGE> 32
2(dd) Contribution Agreement dated November 10, 1999, by and between NYSCRF
and GGP/Homart II (Alderwood Mall). (29)
2(ee) Contribution Agreement dated November 10, 1999, by and between NYSCRF
and GGP/Homart II (Montclair Plaza). (29)
2(ff) Contribution Agreement, dated February 1, 2000, by and between
General Growth Companies, Inc. and GGP Limited Partnership. (30)
2(gg) Purchase and Sale Agreement dated as of March 15, 2000 by and between
Crossroads Shopping Center Trust and St. Cloud Mall L.L.C. (31)
2(hh) Purchase Agreement dated May 25, 2000 among General Growth
Properties, Inc., GGP Limited Partnership, GGPLP L.L.C. and Goldman Sachs 2000
Exchange Place Fund, L.P.
3(a) Amended and Restated Certificate of Incorporation of the
Company. (3)
3(b) Amendment to Amended and Restated Certificate of Incorporation of
the Company.(5)
3(c) Amendment to Amended and Restated Certificate of Incorporation of
the Company filed on December 21, 1995.(11)
3(d) Amendment to Amended and Restated Certificate of Incorporation of
the Company filed on May 20, 1997.(15)
3(e) Bylaws of the Company.(5)
3(f) Amendment to Bylaws of the Company.(5)
3(g) Amendment to Bylaws of the Company.(5)
4(a) Redemption Rights Agreement, dated July 13, 1995, by and among
GGP Limited Partnership, General Growth Properties, Inc. and the persons listed
on the signature pages thereof.(8)
4(b) Redemption Rights Agreement dated December 6, 1996, among
GGP Limited Partnership, a Delaware corporation, Forbes/Cohen Properties, a
Michigan general partnership, Lakeview Square Associates, a Michigan general
partnership, and Jackson Properties, a Michigan general partnership.(2)
4(c) Redemption Rights Agreement, dated June 19, 1997, among GGP Limited
Partnership, a Delaware limited partnership, General Growth Properties, Inc., a
Delaware corporation, and CA Southlake Investors, Ltd., a Georgia limited
partnership.(13)
4(d) Redemption Rights Agreement dated October 23, 1997, among GGPI,
GGPLP and Peter Leibowits.(15)
4(e) Form of Indenture.(12)
4(f) Certificate of Designations, Preferences and Rights of 7.25%
Preferred Equity Redeemable Stock, Series A. (20)
<PAGE> 33
4(g) Amendment to Certificate of Designations, Preferences and Rights of
7.25% Preferred Income Equity Redeemable Stock, Series A of General Growth
Properties, Inc. filed on May 17, 1999. (27)
4(h) Redemption Rights Agreement dated April 2, 1998, among GGP Limited
Partnership, General Growth Properties, Inc. and Southwest Properties Venture.
(17)
4(i) Indenture and Servicing Agreement dated as of November 25, 1997,
among the Issuers named therein, LaSalle National Bank, as Trustee, and Midland
Loan Services, L.P., as Servicer (the "Indenture Agreement"). (18)
4(j) Form of Note pursuant to the Indenture Agreement. (18)
4(k) Mortgage, Deed of Trust, Security Agreement, Assignment of Leases
and Rents, Fixture Filing and Financing Statement, date and effective as of
November 25, 1997, among the Issuers, the Trustee and the Deed Trustees named
therein. (18)
4(l) Rights Agreement, dated November 18, 1998, between General Growth
Properties, Inc. and Norwest Bank Minnesota, N.A., as Rights Agent (including
the Form of Certificate of Designation of Series A Junior Participating
Preferred Stock attached thereto as Exhibit A, the Form of Right Certificate
attached Preferred Stock attached thereto as Exhibit C). (24)
4(m) Form of Common Stock Certificate. (25)
4(n) First Amendment to Rights Agreement, dated as of November 10,1999,
between the Company and Norwest Bank, Minnesota, N.A. (28)
4(o) Letter Agreement concerning Rights Agreement, dated November 10,
1999, between the Operating Partnership and NYSCRF. (28)
4(p) Certificate of Designations, Preferences and Rights of 8.95%
Cumulative Redeemable Preferred Stock, Series B. (32)
10(a) Second Amended and Restated Agreement of Limited Partnership of the
Operating Partnership. (19)
10(b) Rights Agreement between the Company and the Limited Partners of the
Operating Partnership.(6)
10(c) Real Estate Management Agreement dated July 1, 1996, between General
Growth Management, Inc. and GGP Limited Partnership.(13)
10(d) *General Growth Properties, Inc. 1993 Stock Incentive Plan, as
amended.(14)
10(e) Form of Amended and Restated Agreement of Partnership for each of the
Property Partnerships.(3)
10(f) Sale-Purchase Agreement dated as of December 30, 1992, by and between
Equitable and the Company.(3)
<PAGE> 34
10(g) Form of Indemnification Agreement between the Operating Partnership,
Martin Bucksbaum, Matthew Bucksbaum, Mall Investment L.P. and M. Bucksbaum
Company. (3)
10(h) Form of Registration Rights Agreement between the Company and the
Bucksbaums. (3)
10(i) Form of Registration Rights Agreement between the Company and certain
trustees for the IBM Retirement Plan. (3)
10(j) Form of Incidental Registration Rights Agreement between the Company,
Equitable, Frank Russell and Wells Fargo.(3)
10(k) Form of Letter Agreements restricting sale of certain shares of
Common Stock.(3)
10(l) *Letter Agreement dated October 14, 1993, between the Company and
Bernard Freibaum.(6)
10(m) *Form of Option Agreement between the Company and certain Executive
Officers.(13)
10(n) *General Growth Properties, Inc. 1998 Incentive Stock Plan, as
amended.
10(o) Amended and Restated Operating Agreement of GGPLP L.L.C. dated as of
May 25, 2000. (32)
10(p) Registration Rights Agreement dated May 25, 2000 between General
Growth Properties, Inc. and Goldman Sachs 2000 Exchange Place Fund, L.P.
23 Consent of PricewaterhouseCoopers LLP - Independent Accountants. (30)
27 Financial Data Schedule.
(*) A compensatory plan or arrangement required to be filed.
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(1) Previously filed as an exhibit to the Company's Current Report on
Form 8-K dated January 5, 1996, incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Current Report on
Form 8-K dated January 3, 1996, incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's Registration
Statement on Form S-11 (No. 33-56640), incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's Current Report on
Form 8-K dated July 16, 1996, incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, incorporated herein by
reference.
<PAGE> 35
(6) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Current Report on
Form 8-K dated February 25, 1994, incorporated herein by reference.
(8) Previously filed as an exhibit to the Company's Current Report on
Form 8-K dated July 17, 1996, incorporated herein by reference.
(9) Previously filed as an exhibit to the Company's Registration
Statement on Form S-3 (No. 33-23035), incorporated herein by reference.
(10) Previously filed as an exhibit to the Company's Current Report on
Form 8-K dated June 19, 1997, incorporated herein by reference.
(11) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1995, incorporated herein by reference.
(12) Previously filed as an exhibit to the Company's Registration
Statement on Form S-3 (No. 333-37247) dated October 6, 1997, incorporated herein
by reference.
(13) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, incorporated herein by
reference.
(14) Previously filed as an exhibit to the Company's Registration
Statement on Form S-8 (No. 333-28449) dated June 3, 1997, incorporated herein by
reference.
(15) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, incorporated herein by
reference.
(16) Previously filed as an exhibit to the Company's current report on
Form 8K dated June 17, 1998, incorporated herein by reference.
(17) Previously filed as an exhibit to the Company's current report on
Form 8K dated May 26, 1998, incorporated herein by reference.
(18) Previously filed as an exhibit to the Company's current report on
Form 8K/A dated June 2, 1998, incorporated herein by reference.
(19) Previously filed as an exhibit to the Company's current report on
Form 10-Q dated May 14, 1998, as amended May 21, 1998, incorporated herein by
reference.
(20) Previously filed as an exhibit to the Company's current report on
Form 8-K dated August 7, 1998, incorporated herein by reference.
(21) Previously filed as an exhibit to the Company's current report on
Form 8-K dated August 5, 1998, incorporated herein by reference.
(22) Previously filed as an exhibit to the Company's current report on
Form 8-K dated September 30, 1998, incorporated herein by reference.
<PAGE> 36
(23) Previously filed as an exhibit to the Company's current report on
Form 8-K dated October 5, 1998, incorporated herein by reference.
(24) Previously filed as an exhibit to the Company's current report on
Form 8-K, dated November 18, 1998, incorporated herein by reference.
(25) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998, incorporated herein by
reference.
(26) Previously filed as an exhibit to the Company's Registration
Statement on Form S-8 (No. 333-74461) dated March 12, 1999, incorporated herein
by reference.
(27) Previously filed as an exhibit to the Company's Current Report on
Form 8-K, dated July 12, 1999, incorporated herein by reference.
(28) Previously filed as an exhibit to the Company's Current Report on
Form 8-K, dated November 23, 1999, incorporated herein by reference.
(29) Previously filed as an exhibit to the Company's Current Report on
Form 8-K/A, dated January 11, 2000, incorporated herein by reference.
(30) Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1999, incorporated herein by
reference.
(31) Previously filed as an exhibit to the Company's Current Report on
Form 8-K, dated May 9, 2000, incorporated herein by reference.
(32) Previously filed as an exhibit to the Company's Current Report on
Form 8-K, dated June 13, 2000, incorporated herein by reference.
